Private-equity buyouts on track to reach highest total since 2007 - but there's a catch. About $28 billion in deals have been announced in the U.S. this year which puts us on track to top 2007's $51.1 billion, according to Dealogic. But many of these deals are being done with private equity shops on both sides of the transaction. One reason could be uncertainty around the capital gains tax in 2013 - better to lock in gains today at the lower rate than risk a 20 percentage point increase in taxes. This is just one way current uncertainty coming out of Congress is affecting how business gets done.

Moody's raises specter of possible U.S. government rating cut. The ratings agency is looking for solutions in 2013 that produce stabilization and then a downward trend in debt-to-GDP in order to retain its Aaa status. Given S&P's downgrade of the U.S. 13 months ago, investors have had plenty of time to adjust to a "non-AAA United States" world. Markets have proven that even post-downgrade, the U.S. remains the "least dirty sock in the drawer."

Chinese economic slowdown is something to watch closely. Industrial output grew a still-impressive 8.9 percent, but registered the slowest growth rate since May 2009. Chinese economic activity is inherently difficult to measure and many distrust the official government statistics. One recent analysis suggested an overbought real estate market in much worse shape than the U.S. in 2008. The fact is China has produced the world's goods for many years and now that the consumers are taking some time off, the country is and should be struggling. Will the government's central planning help navigate the country to the other side (whenever that comes) or will dislocations grow unchecked, and perhaps even unnoticed until a reversal (bubble-popping) becomes inevitable?

Household income falls to 1995 level, adjusted for inflation. Median household income fell to $50,054 in 2011 according to the Census Bureau. The consumer continues to hurt, primarily due to the job market, but also the housing sector. On the other hand, our culture of consumerism continues as displayed by the hype around this week's iPhone announcement.

Germany's top constitutional court rejected efforts to block the euro area's latest bailout fund. In a decision that was widely expected, but still offered a boost to markets, the court ruled the ESM bailout facility as constitutional under German law as long as it includes binding rules that won't force Germany to provide unlimited funds. In other words, every bailout dollar will still have to be approved by Germany going forward - as it should since they are the primary source of bailout funds. In other news, Denmark decided not to join the euro currency union for now. Gee, I wonder why?!

Old jokes about Greece selling the Parthenon are not so funny anymore. Foreign-based lenders to Greece have rejected the latest proposed austerity package as not providing a clear path toward debt payment. As part of a plan to address their financial situation, Greece has announced it will lease up to 40 uninhabited islands for as long as 50 years to developers who would create high-end tourist resorts.

Key Indices

Return

9/14/2012

1 week

YTD

Treasury

9/14/2012

9/7/2012

Change

Dow

13,593

2.2%

11.3%

30yr

3.09%

2.83%

0.26%

S&P 500

1,466

1.9%

16.6%

10yr

1.87%

1.67%

0.20%

Nasdaq

3,184

1.5%

22.2%

5yr

0.71%

0.65%

0.06%

Euro Stoxx

2,595

2.2%

12.0%

2yr

0.25%

0.25%

0.00%

Nikkei

9,159

3.2%

8.3%

1yr

0.17%

0.17%

0.00%

Hang Seng

20,630

4.2%

11.9%

3mo

0.10%

0.10%

0.00%

Source: Bloomberg

Looking Ahead

There will be a break in economic data next week - which is usual for mid-month - but we will get some important data on housing and factory sector.

A lot of Fed governors are speaking next week which should provide some additional information around the QE3 decision this week. We know Jeffrey Lacker from the Richmond Fed has refused to go along with the idea of additional stimulus for some time. His Tuesday speech on "Maximum Employment and Monetary Policy" should be quite interesting.

Earnings releases include:

Wednesday: Adobe Systems

Thursday: TIBCO Software

Innovation sector IPOs scheduled for next week include: GlobeImmune and Trulia on Wednesday.

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or SVB Asset Management, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB Asset Management are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value.

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.

Top Eight

The Fed went all out this week with an open-ended QE3, extension of the low rate language, and continuation of "Operation Twist." The Fed has now provided more non-traditional easing than most anyone has requested. Will it work? Probably a more relevant question is, once we realize it doesn't work, will the debate shift to what Congress should do, or will we simply continue discussing more of the same?

Private-equity buyouts on track to reach highest total since 2007 - but there's a catch. About $28 billion in deals have been announced in the U.S. this year which puts us on track to top 2007's $51.1 billion, according to Dealogic. But many of these deals are being done with private equity shops on both sides of the transaction. One reason could be uncertainty around the capital gains tax in 2013 - better to lock in gains today at the lower rate than risk a 20 percentage point increase in taxes. This is just one way current uncertainty coming out of Congress is affecting...Read More